Lansdale 329 Prop, LLC v. Hartford Underwriters Ins. Co.

• Decision Date: 28 April 2021
• Docket Number: CIVIL ACTION NO. 20-2034
• Citation: 537 F.Supp.3d 780
• Parties: LANSDALE 329 PROP, LLC, et al., Plaintiffs, v. HARTFORD UNDERWRITERS INSURANCE COMPANY, Defendants.
• Court: U.S. District Court — Eastern District of Pennsylvania

537 F.Supp.3d 780

LANSDALE 329 PROP, LLC, et al., Plaintiffs,

v.HARTFORD UNDERWRITERS INSURANCE COMPANY, Defendants.

CIVIL ACTION NO. 20-2034

United States District Court, E.D. Pennsylvania.

Filed April 28, 2021

Daniel E. Bacine, Mark R. Rosen, Meghan Jane Talbot, Jeffrey A. Barrack, Barrack Rodos & Bacine, Philadelphia, PA, for Plaintiffs.

Anthony J. Anscombe, Steptoe & Johnson, Chicago, IL, Richard D. Gable, Jr., Butler Weihmuller Katz Craig LLP, Philadelphia, PA, Sarah D. Gordon, Steptoe & Johnson, Washington, DC, for Defendants.

MEMORANDUM OPINION

Goldberg, District Judge

The global COVID-19 pandemic has inflicted significant financial hardships on small businesses who were forced to either close or substantially limit access to their customers. In an effort to recoup some of their lost revenue, many of these small businesses have turned to their insurance companies seeking coverage for the losses caused by the forced suspension of business.

Plaintiffs Lansdale 329 Prop, LLC, 329 Mainlans, LLC and Lincoln Liquor LLC d/b/a Stove and Tap, and 560 Wellington Square Associates LLC d/b/a Al Pastor (collectively, "Plaintiffs") are two such businesses who are insureds through policies issued by Defendant The Hartford Financial Services Group, Inc. d/b/a The Hartford ("Defendant"). Defendant has denied Plaintiffs’ claim for business interruption coverage, giving rise to this lawsuit for breach of contract and a declaratory judgment. Hundreds of similar lawsuits have been winding their way through the state and federal courts.¹

Defendant moves to dismiss the Amended Complaint here under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim upon which relief may be granted. For the following reasons, I will grant the Motion and dismiss the Amended Complaint.

I. FACTUAL BACKGROUND

The following facts are set forth in Plaintiffs’ Amended Complaint.²

A. The Policies

Plaintiffs own and operate Stove and Tap and Al Pastor, full-service restaurants with locations in Lansdale, Malvern, and Exton, Pennsylvania. To protect their businesses in case of a sudden suspension of operations for reasons outside of their control, Plaintiffs purchased three policies of Business Owner's coverage from Defendant. These policies are identified as: (1) Policy No. 13 SBA AE7GUH issued to Lansdale 329 Prop, LLC and 329 Mainlans, LLC d/b/A Stove and Tap covered the Stove and Tap restaurant located at 329 Main Street, Lansdale, Pennsylvania 19446 ("Lansdale Stove and Tap"); (2) Policy No. 13 SBA AE7BT5 issued to Lincoln Liquor, LLC d/b/a Stove and Tap covered the Stove and Tap restaurant located at 245 Lancaster Avenue, Malvern, Pennsylvania 19355 ("Malvern Stove and Tap"); and (3) Policy No. 13 SBA AE7DD7 issued to 560 Wellington Square LLC d/b/a Al Paster covered the Al Pastor restaurant located at 560 Wellington Square, Exton, Pennsylvania 19341 ("Al Pastor"). All three policies’ coverage periods run from December 16, 2019 to December 16, 2020. (Am. Compl. ¶¶ 1, 2, 13–15.)

Pursuant to the "Special Property Coverage Form" (Form SP 00 00 1018), the policies all cover "direct physical loss of or direct physical damage to Covered Property ... caused by or resulting from a Covered Cause of Loss." "Covered Cause of Loss" means "direct physical loss or direct physical damage unless the loss or damage is excluded or limited in this Coverage Part." Each policy also included identical endorsements for "Business Income and Extra Expense" (the "Business Income endorsement") and Business Income for Civil Authority Actions (the "Civil Authority endorsement"). These endorsements extend coverage to lost business income, normal operating expenses incurred (including payroll expenses), extended business income during a period of restoration, and extra expenses for expenses that would not have been incurred for the loss or damage. (Am. Compl. ¶¶ 2, 16, 19; Compl., Ex. C ("Policy"),³ p. 1.)

The Business Income endorsement specifically provides, in pertinent part:

We will pay for the actual loss of Business Income you sustain due to the necessary suspension of your "operations" during the "period of restoration". The suspension must be caused by direct physical loss or direct physical damage to property at the "scheduled premises", including personal property in the open (or in a vehicle) within 1,000 feet of the "scheduled premises", caused by or resulting from a Covered Cause of Loss.

(Policy at Form SP 30131018, p. 1.)

The Civil Authority endorsement states, in pertinent part:

When a Covered Cause of Loss causes direct physical loss or direct physical damage to property other than at the "scheduled premises", we will pay for the actual loss of Business Income you sustain and necessary Extra Expense you incur during the "civil authority period of restoration" caused by action of civil authority that prohibits access to the "scheduled premises" provided that both of the following apply:

(a) Access to the area immediately surrounding the damaged property is prohibited by civil authority as a result of the damage, and the "scheduled premises" are within that area but are not more than one mile from the damaged property; and

(b) The action of civil authority is taken in response to dangerous physical conditions resulting from the damage or continuation of the Covered Cause of Loss that caused the damage, or the action is taken to enable a civil authority to have unimpeded access to the damaged property.

(Policy, at Form SP 30191018, p. 1.)

The Policy also excludes losses from "virus, bacterium or other microorganism that induces or is capable of inducing physical distress, illness or disease." (Am. Compl. ¶ 28.) Specifically, this "Virus Exclusion" states:

We will not pay for loss or damage caused directly or indirectly by any of the following. Such loss or damage is excluded regardless of any other cause or event that contributes concurrently or in any sequence to the loss. These exclusions apply whether or not the loss event results in widespread damage or affects a substantial area:

...

Any virus, bacterium or other microorganism that induces or is capable of inducing physical distress, illness or disease.

(Policy, at Form SP 00001018, pp. 3–4.)

B. The Cause of Loss

The COVID-19 pandemic and related efforts to prevent its spread caused civil authorities nationwide to issue orders requiring the suspension of non-essential businesses and preventing citizens from leaving home for non-essential purposes (the "Closure Orders"). These Closure Orders include, but are not limited to, Pennsylvania Governor Wolf's order, dated March 19, 2020, requiring all non-life-sustaining businesses in the Commonwealth to cease operations and close all physical locations. (Am. Compl. ¶¶ 21, 23.)

Plaintiffs’ businesses are not considered "essential" and, therefore, were subject to Closure Orders preventing them from operating their businesses, limiting their operations, and/or restricting use of the covered premises for their intended purpose. Plaintiffs expressly allege that there was no presence of the COVID-19 virus at their properties. Rather, according to the Amended Complaint, Plaintiffs’ suspension of operations resulted solely from the Closure Orders. (Id. ¶¶ 22, 24.)

C. The Lawsuit

On April 27, 2020, Plaintiffs filed suit alleging breach of contract under both the Business Income endorsement and the Civil Authority endorsement and seeking a declaratory judgment that its business losses were covered under the pertinent policies. Plaintiffs brought these claims on behalf of themselves and all other similarly-situated businesses that were denied coverage by Defendant. Plaintiffs filed an Amended Complaint on August 14, 2020, and, on September 11, 2020, Defendant moved to dismiss all claims in the Amended Complaint.

II. STANDARD OF REVIEW

Under Federal Rule of Civil Procedure 12(b)(6), a defendant bears the burden of demonstrating that the plaintiff has not stated a claim upon which relief can be granted. Fed. R. Civ. P. 12(b)(6) ; see also Hedges v. United States, 404 F.3d 744, 750 (3d Cir. 2005). The United States Supreme Court has recognized that "a plaintiff's obligation to provide the ‘grounds’ of his ‘entitle[ment] to relief’ requires more than labels and conclusions." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) (quotations omitted). "[T]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice" and only a complaint that states a plausible claim for relief survives a motion to dismiss. Ashcroft v. Iqbal, 556 U.S. 662, 678–79, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. at 678, 129 S.Ct. 1937. A complaint does not show an entitlement to relief when the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct. Id. at 679, 129 S.Ct. 1937.

The Court of Appeals has detailed a three-step process to determine whether a complaint meets the pleadings standard. Bistrian v. Levi, 696 F.3d 352 (3d Cir. 2012). First, the court outlines the elements a plaintiff must plead to state a claim for relief. Id. at 365. Next, the court must "peel away those allegations that are no more than conclusions and thus not entitled to the assumption of truth." Id. Finally, the court "look[s] for well-pled factual allegations, assume[s] their veracity, and then ‘determine[s] whether they plausibly give rise to an entitlement to relief.’ " Id. (quoting Iqbal, 556 U.S. at 679, 129 S.Ct. 1937 ). The last step is " ‘a context-specific task that requires the reviewing court to draw on its judicial experience and common sense.’ " Id. (quoting Iqbal, 556 U.S. at 679, 129 S.Ct. 1937 ).

III. DISCUSSION

Under Pennsylvania law, the interpretation of an insurance contract is a question of law....